Blue States Likely To Be Hit Hardest By Tax Increases

Now an observation about budget deals, tax increases, ideology, and self interest here in the United States. It comes from writer Joel Kotkin, who covers demographic, social and economic trends. Kotkin recently wrote a piece for Forbes called "The Blue-State Suicide Pact." It's about who favors and who would be hit by a higher tax rate for income over $250,000 a year. And Kotkin says the states that would be hardest hit by the very tax increases that Democrats favor are the states where Democrats tend to be the strongest.

And Joel Kotkin joins us now from Pasadena, and member station KPCC. Welcome to the program.

JOEL KOTKIN: Nice to be here.

SIEGEL: You address the question: where are the top two percent of American households located? And the answer is obviously they're not evenly distributed throughout the states.

KOTKIN: No, they're very heavily concentrated on the coasts, particularly California, Connecticut; the District of Columbia actually has got the highest percentage, so you wonder where your tax dollars are going. Basically, almost all the top 10 are all pretty solidly blue states. And then if you go down to the metro level, it's even stronger; you have New York City, Los Angeles, San Francisco is very, very high.

So you can almost say the more blue an area is, the more they're going to tend to have a lot of these fairly high-earning households.

SIEGEL: What about those billionaires who pay tax at half the rate that their secretaries pay?

(LAUGHTER)

KOTKIN: Well, of course, one of the biggest reasons they do that is 'cause of capital gains and, of course, they have legions of accountants. But I think they tend to be concentrated in the same cities. I mean, if you could afford to live in Santa Barbara, why not?

SIEGEL: So, as the title of your story "The Blue State Suicide Pact" implies, you're saying that Democrats are, in effect, campaigning and saying come and tax our states more.

KOTKIN: Yeah. I mean, I think they're basically saying, in order to carry out, you know, the sort of agenda of saying taxing the rich, we're going to actually tax people who are actually in many cases are not very rich. You know, a family of four with an income of 250 living in Brooklyn, New York, is probably not what you would consider rich. You very high rent. You have high taxes. You have high utility bills. It just gets to be very, very expensive but they are being tagged as the rich.

And I think we're going to see, I think, some of the representatives from the Democratic Party beginning to say, well, maybe the level should be a little bit higher because I've got an awful lot of constituents who will be hit pretty hard by this.

SIEGEL: Now, why not say that this makes a lot of sense: People live and work in metropolitan areas, where there are stark extremes of wealth and poverty, are more likely to be aware of inequality and therefore more concerned about it. People who don't routinely witness those extremes, but only hear and read about it in Forbes and elsewhere, aren't so concerned about it.

KOTKIN: Well, perhaps people are willing to pay the taxes. I think you have a real divide and I think it depends on how you make your money. If you're making your money working for the government or something government-related, you're working at a university, you may tend to be more favorable. If you run a small business, they are extremely upset about this because, obviously, they also have a lot of insecurity in their income levels, so they're not able to save money for the bad times because they're paying so much in taxes.

So I think it depends on who you're really talking about. But I would imagine that there would be more tolerance for this in areas that are blue state, but particularly among certain kinds of workers, as opposed to other kinds of workers.

SIEGEL: Can you imagine the issue turning some blue states purple because of the impact of the tax increases?

KOTKIN: I think it's conceivable if you get the combination of that and you get high tax rates on the state level and the local level. You know, is there some tipping point where some of these people who may be very well intentioned and essentially liberal certainly on social issues, where they will say, you know what, I don't want to pay 50 percent of my income. This is, by the way, the most recent analysis I've seen is we are now, in the state of California, between state and the federal, approaching a 50 percent tax rate over 250,000.

It's very difficult to say to somebody, well, you should work harder and give half your money to the government.

SIEGEL: Joel Kotkin, thank you very much for talking with us.

KOTKIN: Well, thank you. It was my pleasure.

SIEGEL: Joel Kotkin writes a column for Forbes magazine and he also teaches at Chapman University in Orange, California. Transcript provided by NPR, Copyright National Public Radio.